How to Implement VAT in your Business

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Value Added Tax (VAT) has been launched in the UAE since January 1, 2018 as per the VAT agreement signed by all the member states of the Gulf Cooperation Council (GCC). In UAE, VAT will be levied on supply of goods and services at the standard rate of 5%. As per the VAT regulations there are some supplies in the UAE on which VAT will be charged at the rate of 0% instead of the 5% standard rate.

VAT is an indirect tax which is levied by VAT registered businesses on supply of goods and services to customers. VAT is also referred to as a type of consumption tax which is levied by businesses at each stage of the supply chain. In most cases it’s the ultimate users/ consumers that bear the VAT cost. VAT registered businesses in the UAE are responsible for collecting VAT on behalf of the tax authority.

Mentioned below are the steps to follow for business entities that want to register for VAT and implement VAT compliant processes and systems in their businesses:

1. VAT Registration

• Prepare all the information required for registering for VAT in the UAE.
• Register for VAT in the UAE using online portal of the Tax Authority.

2. Understand the structure of the organization and the transaction process

• Provide management and employees with awareness and training regarding what is VAT and how it works.
• Understand the existing business structure and operations and identify changes required to ensure VAT compliance.
• Discuss the changes required to make the existing system and processes VAT compliant with accounts, IT and all the other departments that will get affected due to the required changes.

3. Assess VAT impact on business operations

• Assess and analyse the overall impact of VAT on your financial statements and your business operations in general.
• Identify the departments most affected due to implementation of VAT compliant processes and systems.

4. Manage VAT Transition Process

• First trial run to highlight issues that needs to be resolved before you go ahead with the new systems and processes.
• Final trial run to be ready for VAT compliance.

5. VAT Return Filing

• Review of TAX invoices and credit notes both issued and received.
• Preparation of VAT returns
• Preparation of VAT Audit File
• Filling VAT return

Push Digits offer its clients a variety of tax consultancy services in various emirates of the UAE. We at Push Digits have a team of highly skilled tax professionals having extensive experience of working in various industries around the globe. We provide our clients with VAT implementation services, VAT advisory services, VAT training and VAT return filing services.

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